Against all odds, the US economic activity has been rising
at a strong rate
All 3 TIER composite indicators go up signifying a momentary upbeat

The Taiwanese Economy in July 2018

Like the Federal Reserve's recent FOMC statement mentioned that
the US economic activity had been rising at a strong rate outperforming
all other major economies in the world. The European Union, China,
and Japan on the other hand have been slowing down in growth due
to different causes. The Taiwan Institute of Economic Research (TIER)
issued manufacturing, service sector, and construction sector composite
indicators on the 24th August 2018, whereas all 3 indicators go
up signifying a momentary upbeat in Taiwan's economic performance.
Taiwan's exports in July 2018 increased by 4.71% compared with the
same month of 2017. Regarding imports, Taiwan's imports in July
2018 increased by 20.45% compared with imports in July 2017. Exports
and imports grew by 9.93% and 12.24% y-o-y respectively from January
1st till the end of July this year, Taiwan's exports and imports
gave a trade surplus of US$ 27.79 billion or a decrease by 1.84%
on a y-o-y basis for the first 7 months of this year.
Taiwan's consumer price index (CPI) grew by 1.75% in July 2018 compared
with the same month of previous year. The core inflation rate excluding
prices of the energy and food grew by 1.50% in July, 2018. In addition,
the wholesale price index (WPI) moved up by 7.02% in July 2018 on
the year-on-year basis. On the cumulative basis, the CPI went up
by 1.65% and WPI went up by 2.99% from January 1st till July 31st
2018 compared with the same period last year.
As for exchange rate, the NTD went weaker due to the relatively
stronger USD, as the Fed is likely to continue its rate hiking cycle
and capital continued to flow out. Anyway, the NTD/USD stood at
30.61 in late July 2018 indicating a 0.37% depreciation. Regarding
the interest rate, it remained low and steady in July 2018 due to
the continued loose monetary operations by the CBC with respect
to the most recent CPI reading and potential global uncertainties;
the lowest and highest over-night call rate in July 2018 stood at
0.184% and 0.191% respectively.

Business Outlook

The portion of manufacturing firms who perceived business were
better than expected in the target month was 26.2% or decreased
by 0.9 percentage points compared with respondents who perceiving
better business in the previous month. The portion of those perceived
business were getting worse in the target month was 20.5% or decreased
by 2.8 percentage points than 23.3% perceiving worse business of
the previous month. The portion of manufacturing firms who perceived
business remained constant in the target month was 53.3% or increased
by 3.6 percentage points compared with 49.7% perceiving constant
business in the previous month. Overall, manufacturing firms perceived
the business in the target month was rather neutral.
In addition, the portion of manufacturers who perceived business
would be better in the next six months was 24.0% in the target month
or decreased by 2.8 percentage points than 26.8% feeling more optimistic
about the future in the previous month. The portion of firms who
perceived the economic outlook would be worsening was 15.5% or decreased
by 0.8 percentage points compared with 16.3% feeling rather pessimistic
about the future in the previous month. The portion of manufacturing
firms who perceived business remained constant in the next six months
stood at 60.5% or increased by 3.5 percentage points compared with
57.0% feeling neutral about the business outlook one month earlier.
Overall, manufacturing firms perceived the business in the near
future was also somewhat neutral.
The manufacturing composite indicator for July, 2018 adjusted for
seasonal factors on moving average, saw an upward correction, and
from a revision of as 100.39 points in June moved up to 101.74 points
in July. Figure 1 shows an increase of 1.35 points, the first increase
after a decline.
The TIER service sector composite indicator for July, 2018 adjusted
for seasonal factors on moving average, also saw an upward correlation,
and from a revision of as 97.05 points in June moved up to 100.43
points in July. Figure 1 shows an increase of 3.38 points, the first
increase after a decline as well.
In addition, the TIER Construction Sector Composite Indicator for
July 2017 adjusted for seasonal factors on moving average nevertheless
saw an upward correction, too, and from a revision of 97.64 points
in June went up to 98.51 points in July. Figure 1 shows an increase
of 0.87 points, a two-month consecutive mount.

Forecast on Individual Industries

Following are manufacturers' sentiments that are industry-specific
in the monthly TIER surveys:

● Manufacturers' sentiments that have been in decline in the July
survey and are expected to deteriorate over the next six months
include:
Leather, Fur and Allied Product Manufacturing, Electrical Appliances
and Housewares Manufacturing, Bicycles Parts Manufacturing.

● Manufacturers' sentiments that have been in decline in the July
survey, but are expected to improve over the next six months include:
Communications Equipment and Apparatus Manufacturing.

● Manufacturers' sentiments that have been in decline in the July
survey and are expected to remain sluggish over the next six months
include:
Chemical Products Manufacturing, Porcelain and Ceramic Products
Manufacturing, Metal Structure and Architectural Components Manufacturing,
Motor Parts Manufacturing, Securities.

● Manufacturers surveyed who felt the July outlook was the same
as the previous month, but the outlook is expected to exacerbate
over the next six months include:
Wood and Bamboo Products Manufacturing, Telecommunication Services.

● Manufacturers surveyed who felt the July outlook was the same
as the previous month, but the outlook is expected to improve over
the next six months include:
Non-metallic Mineral Products Manufacturing, Cement and Cement Products
Manufacturing, Data Storage Media Units Manufacturing and Reproducing,
Education and Entertainment Articles Manufacturing, Restaurants
and Hotels.

● Manufacturers' sentiments that have improved in the July survey
and is expected to deteriorate over the next six months include:
Plastic Products Manufacturing, Motorcycles Parts Manufacturing.

● Manufacturers' sentiments that have improved in the July survey
and is expected to remain upbeat over the next six months include:
Paper Manufacturing, Electronic Parts and Components Manufacturing,
Precision Instruments Manufacturing, Banks.

● Manufacturers' sentiments that have improved in the July survey
and the trend is expected to continue for the next six months include:
Food, Frozen Food Manufacturing, Edible Oil Manufacturing, Flour
Milling and Grain Husking , Soft Drink Manufacturing , Machinery
and Equipment Manufacturing and Repairing, Cutlery and Tools Manufacturing,
Industrial Machinery, Real Estate Investment, Wholesale, Insurance,
Transportation and Storage.